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Economics 4.1.1
Economics- Edexcel 4.1.1
Term | Definition |
---|---|
globalisation | process by which economies and cultures have been drawn deeper together and have become inter-connected through deep global networks of trade, capital flows, and the spread of technology and global media |
how has globalisation developed? | deep global networks of trade, capital flows, and the spread of technology and global media |
key benefit of globalisation | allows businesses and countries to specialise in producing products where they have a comparative advantage, enabling a gain in economic welfare |
characteristics of globalisation | increasing trade to GDP ratios/expansion of financial capital flows across international borders/increase FDI/more global brands/deeper specialisation of labour/global supply chains/high labour migration/increasing connectivity of people |
key factors contributing to globalisation | containerisation/technological advances/differences in tax systems/less protectionism |
containerisation | dropping real prices of ocean and air shipping due to standardised containers creates economies of scale in freight industries, reducing unit cost of transporting products |
technological advances | cuts cost of transmitting and communicating information |
differences in tax systems | low corporate profit taxes help attract inflows of FDI |
less protectionism | average import tariffs have fallen BUT recent rise in non-tariff barriers |
non-tariff barriers | import quotas, domestic subsidies & tougher laws & regulations |
TNCs | transnational corporations |
transnational corporations | base their manufacturing, assembly, research and retail operations in several countries |
why do TNCs relocate? | relocate to countries that usually have relatively low unit labour costs to increase profits and dividends for shareholders |
comparative advantage | an economy's ability to produce a particular good or service at a lower opportunity cost than its trading partners |
examples of TNNCs | China Mobile/Alibaba/Tata Group/Infosys/Geely Auto/Huawei |
impact of globalisation on different countries | depends on how well integrated they are in the world economy and whether they have the factor resources that allow them to gain from globalisation |
domestic savings gap | a situation where the existing level of savings is insufficient to achieve an economic objective |
advantages from globalisation | economies of scale create gains in economic welfare/less monopolies & higher innovation/faster economic growth reducing extreme poverty/free movement of labour/open capital markets/increase awareness/improved standards of government |
extreme poverty other name | absolute poverty |
relative poverty | when households receive 50% less than average household incomes |
absolute poverty | living below subsistence (the person is unable to meet their basic needs of food, clean water, sanitation, health, shelter and education) |
systemic risk | the potential for a failure or crisis in one or more parts of the financial system to spread and cause widespread disruption to the entire system |
disadvantages from globalisation | rising relative poverty/threats to global commons/greater exploitation of environment/macroeconomic fragility/trade imbalances/structural unemployment/dominant global brands |
impact of globalisation on UK economy | expanded choice & consumer surplus/changing retail prices & rate of inflation/UK firm relocate production to lower-wage economy/net inward migration change real wages & UK gov spending/inward investment/changing share prices and profits of UK companies |
external shocks | events that come from outside a domestic economic system |
negative economic shocks | create much instability and can lead to persistent periods of weaker economic growth, higher unemployment, falling real incomes and rising poverty |
positive external shocks | external events that benefit the economy |
examples of external shocks in a globalised world | Global Financial Crisis/2020 Pandemic/volatile world commodity prices/growth slowdowns in emerging nations/international & regional trade & investment deals/currency volatility & policy changes/extreme weather /geopolitical uncertainty & terrorism risks |